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Japanese commercial real estate markets has fallen by almost
20% over the two and a half years to the end of the third quarter 2010, the
IPD Japan Monthly Indicator shows.

Japan, the world’s second-largest commercial property market by value, is one
of the few major real estate markets to continue to record capital depreciation,
reflecting the country’s weak economic growth.

By the end of the third quarter of last year, up to which point IPD has its
most current Japanese data, UK, the US and Australia had all emerged into
positive capital growth. In the UK, the rebound was a significant 17.4%, while
the US had risen by 5.5% over the previous six months and Australia had
recovered by a modest 1.1%.

Back in Japan, the annual rate of capital
depreciation was -6.3% at the end of September 2010 – the shallowest rate of
capital decline since December 2008 and a significant improvement on the -12.2%
annual capital growth rate in September 2009.

The retail sector, driven by improved
consumer confidence, has continued to buck the trend of the broader market by
showing an upturn in the capital growth recovery, ending September with an
annual capital return of -2.8%. This is the shallowest rate of capital
depreciation since July 2008.

At the other extreme is offices, which is
running at an annual capital depreciation of -8.3%, reflecting the continuing
economic malaise. Between the two sectors is residential, which had an annual
capital growth rate of -4.5% to end September 2010.

Toshiro Nishioka, Managing Director at IPD Japan, said:
"There is no immediate end in sight to the two and a half year unbroken period
of capital write-downs. Each quarter brings, at best, modest improvements. The
market would benefit from increased transactions, which would boost confidence
and provide a deeper insight into the property fundamentals."